A pending U.S. Supreme Court ruling may shed new light on the issue of whether consumers can sue financial institutions successfully for failing to disclose their ATM fees on the exteriors of their machines.
The decision could affect hundreds of cases pending across the U.S. in which plaintiffs allege that banks and credit unions violated Regulation E of the Electronic Funds Transfer Act by failing to properly post their ATM fees.
The Consumer Financial Protection Board also invited public comments on whether the rule should be revised (see story).
Certain financial institutions recently agreed to settle such cases and paid damages to plaintiffs and attorney's fees (see story).
But a U.S. District judge reviewing such a case in Nebraska on June 4 found no proof that the plaintiff was harmed in a lawsuit brought against a community bank, and she stayed a motion to dismiss the case pending a Supreme Court decision on a similar issue.
Attorneys for First National Bank of Wahoo, Neb., are optimistic that the bank will win the case, which could set a precedent for many pending cases, Ken Hartman, a partner with Omaha, NEB.-based Baird Holm LLP, which represents First National, tells PaymentsSource.
"Banks are already required by other laws to disclose ATM fees on the machines' screens. And even if there is no exterior sticker, consumers are getting a clear notification of fees before they agree to the transaction, so there is no harm or injury to them," Hartman says.
U.S. District Judge Laurie Smith Camp noted in her ruling that further proceedings in the First National of Wahoo case be stayed pending the Supreme Court's decision in First American Financial Corp. vs. Edwards. That case involves alleged kickbacks to title insurance brokers and deals with the constitutional question of whether a plaintiff must suffer injury to bring such a claim, Hartman says.
"The similarity in the two cases is whether the plaintiff was injured, and in the ATM case we argue they were not because they were notified they would be charged a fee before they approved the cash withdrawal," Hartman says.
In her ruling, Smith Camp cited three other district court opinions in similar ATM fee-notification cases, suggesting that those "did not address the 'hard floor' constitutional requirement of injury in fact." The Constitution requires "more than mere injury in law," she noted.
Hartman believes Smith Camp's ruling could have an important effect on similar pending cases.
A variety of plaintiffs are securing awards in class-action suits, and lawyers are drumming up business because existing laws provide for covering attorney's fees in such cases. And one Michigan retiree appears to be running a cottage industry based on ATM-fee sticker suits (see story).
"We are on hold pending the Supreme Court's decision. But having read the discussion on that case, I am confident we will prevail," Hartman says. "Right now we have a bounty kind of situation, where people are driving around looking for ATMs without a fee sticker on it, using it knowing they will be charged a fee, in order to create lawsuits."
Certain lawmakers have proposed amending the Electronic Funds Transfer Act to eliminate the requirement for exterior notification of ATM fees as long as bank are already required to notify consumers on ATM screens or paper slips before authorizing transactions, Hartman notes.
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